TaxTMI 
TaxTMI 
1984 (12) TMI 144
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....d that the appeal of the assessee is there to keep the matter alive on the following items: . . Rs (1) General Expenses 8,425 (2) Repairs to building 9,675 (3) Fire & General Insurance 5,711 (4) Bungalow maintenance 5,813 (5) LTA, Rent, bungalow and passage 12,000 (6) Passage and leave travel allowance 1,840 (7) Godown rent 11,950 (8) Garage rent 41,234 It was also stated that Ground No. 2 is not pressed. Therefore, we confirm the order of the CIT(A) on the items mentioned hereafter for the disallowance of weighted deduction: Ground No. (1). (1) Bank charges Rs. 1,811 (2) Repairs to machinery Rs. 3,922 (3) Repairs to furniture Rs. 2,865 (4) Rates and taxes Rs. 11,265 (5) Marine Insurance Rs. 1,298 (6) Research and Development expenses Rs. 594 Ground No. (2) (1) Electricity 50 per cent (2) Newspaper & periodicals 50 per cent (3) Postage 50 per cent (4) Telegrams 50 per cent (5) Telephones 50 per cent (6) Medical expenses 75 per cent (7) Staff welfare 75 per cent....
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.... when salary to employees employed in the Export Department of the assessee has been allowed at the rate of 75 per cent, then the expenses on the building where such employees resided and the furniture used by them and taxes, etc. paid on the items of goods exported are to be taken as expenses for the purpose of export. We do not accept this contention as there is no substance in it in view of the decision of the Hon'ble Madras High Court. Moreover these expenses are in India and furniture in the bungalow and its repair is there to provide facility to the managing director and therefore, it has no nexus with the export business and it cannot be taken that as salary to the managing director and the employees allowed at the rate of 75 per cent, therefore, the weighted deduction is also to be allowed accordingly on these expenses, we hold that building repairs, furniture, godown rent, garage rent, fire and general insurance are the expenses incurred within India and there is no material on record to prove that these are exclusively solely for the purpose of export business and it cannot be there in the case of the assessee in view of the facts that the assessee is having export and lo....
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.... of s. 35B(1)(b)(i) and proved that it is expenditure on such items wholly and exclusively for the purpose of export business. This criteria laid down by the Hon'ble Madras High Court has not been met by the assessee and therefore, following the aforesaid decision of the Hon'ble Madras High Court we hold that the assessee is not entitled to weighted deduction on these items of expenses. Since the authorities below have rejected the claim of the assessee for weighted deduction on these items of expenditure, hence we confirm the impugned order holding further that it is in accordance with the decision of the Madras High Court. The appeals are dismissed. August, 1983. C. R. NAIR, A. M.: I have gone through my ld. brother, the Judicial Member's order. With great respect. I wish to dispose of the appeals differently. 2. The assessee-company has an export division for export of handloom goods. Regarding the export division expenditure the assessee claimed deduction under s. 35B (export market development allowance) for the asst. yr. 1974-75 before the ITO inter alia on the following items, consequent on the Tribunal's order dt. 28th Jan., 1980 in ITA No. 158/Mad/1978-79 resto....
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......100 per cent Sales Promotion expenses ....100 per cent Electricity ....50 per cent Newspapers & periodicals ....50 per cent Postage ....50 per cent Telegrams ....50 per cent Telephones ....50 per cent Medical expenses ....75 per cent Staff welfare ....75 per cent Samples ....100 per cent Uniforms ....100 per cent Export Credit Guarantee Corporation ....100 per cent After ascertaining the eligible expenditure in this manner, the ITO should allow 50 per cent of the eligible expenditure as weighted deduction. It must be noted that only expenditure debited to the P & L a/c will be eligible for weighted deduction but not the expenditure debited to the manufacturing account or the trading account." 3. The assessee is before us in appeal against the CIT(A)'s order. Though the assessee's written grounds of appeal contained a number of items, the assessee's ld. counsel at the time of hearing restricted the claim to the following items: 1. General expenses Rs. 8,425 2. Repairs to building Rs. 9,675 3. Fire and General Insurance Rs. 5,711 4. Bungalow maintenance Rs. 5,813 ....
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....sion. The statutory condition laid down in s. 35B is that weighted deduction can be allowed only on the expenditure which is incurred wholly and exclusively on the various items of expenditure detailed in cls. (i) to (ix) of s. 35B(1)(b). The Spl. Bench of the Bombay Tribunal in J. Hemchand & Co. vs. Second ITO considered the scope of s. 35B and summarised the features of s. 35B including the condition that the expenditure must have been wholly and exclusively incurred on activities referred to in sub-cls. (i) to (ix). The Tribunal further went on to say: "We would add that whatever of the common expenses incurred by an assessee that could properly and fairly be apportioned on any of the activities referred to above any also be taken for the purposes of the section as wholly and exclusively on such activity. As already mentioned, no hard and fast rule is possible to be outlined as to how such apportionment should be effected. Nor is it possible to postulate in a general discussion what all kinds of expenditure can properly be brought under the various sub-clauses of s. 35B(1)(b). Whether a particular claim raised by an assessee falls under any one or more of the activities falls....
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....m inclined to agree with the department that the assessee is not entitled to weighted deduction on general expenditure of Rs. 8,425 since there are no details thereof to support the assessee's claim of weighted deduction. Regarding fire and general insurance which is stated to be related to stock : I am of the view that this will not fall under any of the expenditure specified in the sub- clauses of s. 35B(1)(b). Regarding bungalow maintenance, LTA, rent, bungalow and passage, passage and leave travel allowance it is the assessee's contention that they in effect form part of the remuneration paid to the export manager and therefore eligible for weighted deduction. Similarly regarding repairs to building, godown rent and garage rent (stated to be actually export office rent) the assessee's contention is that these items represent rent and other incidental expenses relating to the office premises. However, the orders of the ITO and the CIT (A) do not given the details regarding the nature of the expenditure nor the reasons for the rejection of the assessee's claim. The factual position regarding the above item is not clear and hence it becomes difficult to adjudicate on the assessee'....
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....unal is not good law in view of the Madras High Court decision in (1983) 140 ITR 855?" 5th Dec., 1984 Order M. R. SIKKA, VICE-PRESIDENT (Third Member): There being difference of the opinion between the ld. Members of the Tribunal, the following question has been referred to me for decision: "Whether, on the facts and in the circumstances of the case, the Tribunal should consider the assessee's claim for weighted deduction under s. 35B in respect of the items of the expenditure in question incurred in the Export Division on the basis of the Bombay Special Bench decision of the Tribunal dt. 17th June, 1978 in ITA Nos. 3255 & 3330 (Bom)/1976-77 in the case of J. Hemchand & Co., as not being contrary to the Madras High Court decision in (1983) 140 ITR 855 (Mad) (CIT vs. Southern Sea Foods (P) Ltd.); or whether it should be held by the Tribunal that the ratio laid down by the above decision of the Tribunal is not good law in view of the Madras High Court decision in (1983) 140 ITR 855?" 2. The assessee-company, inter alia, carrier on export business in handlooms. For the asst. yrs. 1974-75 and 1976-77, it claimed weighted deduction under s. 35B of the IT Act, 1961, in ....
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....ld. Judicial Member observed that the weighted deduction was to be allowed on the items of expenditure incurred wholly and exclusively for the purpose of export business and, therefore, the ratio laid down by the decision of the Tribunal in "J. Hemchand & Co." was not good law in view of the decision of the Hon'ble Madras High Court in the case of "CIT vs. Southern Sea Foods (P) Ltd." On merits, the ld. Judicial Member held that the assessee was not entitled to weighted deduction as the expenditure, apart being incurred in India, had not been wholly and exclusively expended for the purpose of export business. 7. The ld. Accountant Member, On the other hand, observed that the ratio of the decision of the Special Bench of the Tribunal in the case of J. Hemchand & Co. was not in any way, contrary to the decision of the Madras High Court in the case of "Southern Sea Foods (P) Ltd". He pointed out that the Madras High Court had laid down in (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) that the conditions of s. 35B should be strictly complied with, and the Special Bench of the Tribunal had also insisted that the expenditure should be wholly and exclusively incurred on the specifi....